In this paper, we introduce a new Bayesian approach to explain some market anomalies during financial crises and subsequent recovery. We assume that the earnings shock of an asset follows a random walk model with and without drift to incorporate the impact of financial crises. We further assume...

This paper considers the portfolio problem for high dimensional data when the dimension and size are both large.We analyze the traditional Markowitz mean-variance (MV) portfolio by large dimension matrix theory, and find the spectral distribution of the sample covariance is the main factor to...

Adopting a MS-VAR model (Krolzig, 1997) and a recently developed regime-dependent impulse response analysis technique (Ehrmann, et al., 2003), this paper investigates the dynamic relationships among the stock markets of the US, Australia and New Zealand. Our results reveal the existence of two...

Barberis, Shleifer and Vishny (1998) and others have developed Bayesian models to explain investors' behavioral biases by using the conservatism heuristics and the representativeness heuristics in making decisions. To extend their work, Lam, Liu, and Wong (2010) have developed a model of weight...

In this paper, we introduce a new pseudo-Bayesian model to incorporate the impact of a financial Crisis and establish some properties of stock returns and investors' behaviors during the financial crisis and during recovery after crisis. Our proposed model can be applied to investigate some...

This study establishes necessary conditions for Almost Stochastic Dominance criteria of various orders. These conditions take the form of restrictions on algebraic combinations of moments of the probability distributions in question. The relevant set of conditions depends on the relevant order...

This article investigates the impact of gold in portfolios in distinguishing between Islamic and conventional stocks as well as between risk-averse and risk-seeking investors, while considering sectorial specificities. Using daily data from the Dow Jones indexes and the London gold market over...

Using the Markowitz mean-variance portfolio optimization theory, researchers have shown that the traditional estimated return greatly overestimates the theoretical optimal return, especially when the dimension to sample size ratio is large. Bai, Liu, and Wong (2006,2009a,b) propose...

To obtain better optimal portfolios, academics develop the behavioral portfolio theory (BPT) with two mental accounts by minimizing the risk as well as maximizing the return. However, there are some limitations to the existing BPT. To circumvent the limitations, this paper proposes a new...